Why DTS Got Destroyed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of DTS (Nasdaq: DTSI  ) got destroyed today, down by 26% at the low, after the company announced preliminary second-quarter results.

So what: Revenue should be between $21 million and $22 million, while the bottom line is expected to be "significantly affected" by costs related to its acquisition of SRS Labs (Nasdaq: SRSL  ) . That top line is worse than what investors were expecting. The company attributed this sales miss to macro factors that held back the consumer electronics sector, hitting its Blu-ray markets.

Now what: Figures are still being finalized, but investors have a pretty good idea of what to expect up top. Some seasonality is normal, but this second quarter weakness is beyond standard fluctuations, according to CEO Jon Kirchner. He said weak Blu-ray sales were somewhat offset by growth in network-connected markets, where DTS is shifting its focus to. The pending acquisition of SRS Labs will help bolster DTS's position in those markets.

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